Mailbag: Hold or Fold?

Wealthy Retirement View in browser Brought to you by The Oxford Club Thursday, April 2, 2015 The ONE Obama "Program" Even Republicans and Libertarians Will Love Obama, Bush and Clinton have quietly been collecting millions thanks to "The Presidents' Private Stock Market." It's off-limits to 99% of Americans... But now we've discovered a way that even regular investors could see cash within the next few weeks. To learn how to get your "fair share," just click here. Mailbag: What to Do in the Face of Dividend Cuts Kristin Haugk, Research Analyst, The Oxford Club From the Mailbag: "What do you do if a company in your portfolio cuts or eliminates its dividend?" Kenny Rogers has the right idea: "You got to know when to hold 'em; know when to fold 'em." Sometimes dividend cuts (or worse) happen. Occasionally, we as investors fail to heed the warning signs. We fall in love with a position and overlook its faults. Because we have become "emotionally involved" with a stock, the dividend cut surprises us and becomes the ultimate betrayal. When I began my Wall Street career, I received a lot of advice - good and bad. Luckily, I had a great mentor to guide me through the moat of trite investment clichés. From him, I received an invaluable investor education. But it was his first lesson that stuck with me: "Never get married to a position." He went on to say, "Stocks don't know if you own them and stocks don't know if you short them. Don't get attached." Almost every investor I know is guilty of "marrying" a stock at one time or another. Even me. A dividend cut is a good, albeit potentially expensive, reminder of why we as investors need to separate "stock and state." And by state, I mean emotional state. After a dividend cut, you have two choices: hold or sell. In my case, I generally follow "The Gambler's" advice. I walk away. Here's why. Are We Heading for an Oil War? ... The latest intelligence suggests the battle has already begun. "Saudi Arabia and OPEC may have just launched an Oil War," according to one award-winning journalist. According to an ex-CIA director, "Unless we do something... We will be in the hands of OPEC for a long time." Here's what YOU MUST DO to protect yourself, starting now. The reason I buy a dividend stock is because I believe the dividend, and thus my income stream, will rise over time. If the company stops raising its dividend, but doesn't cut it, I'll still hold the stock. But once a company reduces or eliminates its dividend, the stock's position in my income portfolio is dispensable. I bought the stock to increase my income stream, not reduce it. I would rather cut my losses and put that money to work in a better income producer than hold on and hope for a dividend rebound. Holding a stock after a dividend cut is also dangerous to your principal investment. Stocks almost always decline following a reduction. Selling immediately following the announcement is the best way to protect yourself from further investment loss. After all, "Every gambler knows that the secret to surviving is knowing what to throw away and knowing what to keep." Thankfully, Wealthy Retirement readers have Marc's Safety Net to help foresee pending dividend doom. And bypass dividend decimation. Marc's proprietary system anticipates dividend cuts weeks and even months before they happen. His book Get Rich With Dividends provides interested investors with a detailed description of the methods to his dividend safety madness. (It's back in stock, so pick up your copy here before it sells out again!) The Safety Net analyzes free cash flow, dividend payout ratio and dividend history to calculate each stock's safety "grade." The grade corresponds with the likelihood of a future dividend cut. With the Safety Net's help, investors are able to sell risky dividend stocks before the dividend cut happens. You don't need an MBA or an accounting degree to figure it out. So remember, you can avoid dividend cuts, and prevention is the best cure for your income portfolio. What's the best, worst or funniest investment advice you have ever received? Simply post your story using the comment link below. Or, if you'd prefer to contact us privately, click here. Good investing, Kristin Click here to post a comment on WealthyRetirement.com Social Security's "Final Deathblow"? A coming $91 trillion market shock - lasting just 3 minutes - could gut our Social Security system once and for all. If you're at or near retirement age, you need to know what's coming. And there's still time to prepare. Here's the shocking truth, from America's most conservative income investor... including his recommendations for surviving the possible crisis. Recent Articles From Wealthy Retirement The Safety Net: A Near-Perfect 7% Yield by Marc Lichtenfeld Wednesday, April 1, 2015 One of the more popular master limited partnerships is Energy Transfer Partners. The stock pays a 7.1% yield. And it has an interesting track record. Read On... Two-Minute Retirement Solution: Budgeting for the Unpredictable by Steve McDonald Tuesday, March 31, 2015 There are two kinds of costs in retirement when it comes to healthcare. One is easy to prepare for. The other is almost entirely unpredictable. Over the next two minutes, Steve McDonald reveals what these costs are and how you can best budget for both. Read On... How to Boost Your Dividends 15% in Your Retirement Accounts by Marc Lichtenfeld Monday, March 30, 2015 It's tax season - everyone's favorite time of year. A common credit that people take is the foreign withholding tax credit. But what many don't know is that by holding foreign investments in the wrong account, they may lose that credit. 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